Creating knowledge of end users' requirements
the interface between firm and project
Kristian Widén, Assistant Professor, Division of Construction Management, Lund University
In order to stay competitive and meet the changing needs of the market, construction firms must develop efficient means of gathering and using knowledge of end users' requirements. This paper uses two case studies to explore the knowledge creation of end users' requirements in project-driven firms. The focus of the study is the interface between the firm and project. The interface is analyzed from both an autopoietic and cognitive, organizational, and societal view. The findings implicate the importance of understanding (a) what kinds of knowledge that is dominated in the different organizations, (b) what could be expected in the exchange of data, and (c) what action needs to be taken in order to create value of it. The study suggests that considering the organization as an autopoietic system could be useful to understand the organizations responses to a dynamic environment.
Keywords: knowledge creation, end-user requirements, project-driven firms
Knowledge is an important asset in a firm, and the ability to learn is essential for staying competitive in the market (Blessing, Goerk, & Bach, 2001; Hong, Kianto, & Kylaheiko, 2008; Andersen & Vaagaasar, 2009). Companies must have knowledge about their customers (Blessing et al., 2001) and know how to manage that knowledge efficiently (Connell, Klein, Loebbecke, & Powell, 2001), both by sourcing and sharing knowledge (Velasquez, Durcikova, & Sabherwal, 2009). The capability to learn within a firm is affected by a number of factors, for example, the organizational structure (Hobday, 2000; Lam, 2000) and the ability to combine the development of knowledge with knowledge application and measurement (von Krogh & Roos, 1996).
A project-based firm is one that focuses strongly on the project dimension and carries out most of their activities in projects (Lindkvist, 2004). Hobday (2000) discussed the concept of project-based organizations by describing six different kinds of organizations arranged according to the influence projects have on the body of knowledge within the firm: functional, functional matrix, balanced matrix, project matrix, project-led, and project-based organizations. The ability to learn is higher in a traditional functional matrix organization than in a project-based organization (Hobday, 2000). The project-based organization is decentralized (Lindkvist, 2004) and loosely coupled (Orton & Weick, 1990). Loose coupling occurs because the knowledge the individuals possess is not effectively shared (Orton & Weick, 1990) as every part of project organization is a separate, isolated unit. One way to improve the learning capacity in a project-based organization is to encourage cross-project communication. Because of the cross-project communication, the purely project-based firm becomes a project-led firm. A strength of project-based organizations is, for example, its capacity to meet clients' needs by a close engagement with the end users (Hobday, 2000).
To stay competitive in a dynamic environment, it is essential for project-based firms, such as construction firms, to be able to respond to rapid changes and new demands (Gann & Salter, 2000). The needs, requirements, and expectations of the client and the end users have to be understood in order for the firm to be able to create value for them (Project Management Institute [PMI], 2008; Achterkamp & Vos, 2008). In construction projects, the client is sometimes also an end user of the project result, but not necessarily. The client can be both representing a firm and be a private person. The end users are sometimes known by person, but not always. Each of these preconditions requires different approaches in order to create value for the client as well as for the end user.
Feedback and learning loops are essential for improving the quality of the work provided, creating knowledge, and finding innovative solutions, but these loops are often broken in project-based firms (Gann & Salter, 2000). A number of tools exist for managing end users and their requirements in construction projects, but these seldom provide any guidance about how to act upon the outcome and most commonly focus only on one part of the process. This lack of guidance and narrow focus complicates the ability to use such tools to learn and improve (Pemsel, Widén, Hansson, 2010). The purpose of this research is to explore the characteristics of the sourcing and sharing process in gaining information about the end users' requirements when the end users are unknown. To gain a deeper understanding of the nature of the learning process in the firms, we conducted a comparative analysis of two perspectives of learning: cognitive and autopoietic.
Knowledge and Learning in Organizations
Knowledge is a multidimensional concept with various definitions and meanings (Starbuck, 1992; Nonaka, 1994). Knowledge has both a tacit and explicit dimension and new organizational knowledge is created from a constant dialogue between the tacit and the explicit. Information turns into knowledge when it is interpreted and related to a context by its holder; it requires human action. Knowledge can be held by individuals, organizations, and societies (Nonaka, 1994). The organization can be considered as a distribution system of knowledge (Tsoukas, 1996) or an integrator of knowledge (Grant, 1996), in which the knowledge consists of physical and social capital, routines, organizational cultures, and the individuals (Starbuck, 1992). Learning in organizations can be viewed as single- or double-looped. Single-loop learning occurs within accepted routines while double-loop learning requires that the underlying values and features be changed. Single-loop learning is appropriate for everyday work procedures, but to improve long-term efficiency in the organization requires double-loop learning (Argyris, 1999). Argyris (1999) said, “Learning occurs when invented solution is actually produced” (p. 68). The creation of knowledge can be viewed as a process influenced by, for example, normative expectations in the context, and the past and the present experience of individuals and the collective group (Tsoukas, 1996; Karni & Kaner, 2008).
Knowledge creation and learning can be regarded as a social (Lundvall, 1992; Mariotti, 2007) and dynamic process; it is not solely the transfer of information and data (functional view) (Mariotti, 2007). The “input-process-output” view of information processing in organizations has been the dominant view in strategic management studies (Nonaka, 1994; Mariotti, 2007). This input-process-output view is regarded unprolific by many researcher as it considers the organization to be passive and static (Nonaka, 1994) and humans as passive receivers like computers (Sveiby, 1996). Sveiby argued that knowledge is an active process-of-knowing that requires human action, interpretation, and understanding.
Cognitive, Organizational, and Societal Perspective
Lam (2000) presented a three-level framework (Figure 1) “to explain how knowledge, organizational forms, and societal institutions interact to shape learning and innovation” (p. 489).
Figure 1. The Relation Between the Knowledge Type, Characteristics of the Organization, and Learning (Figure adapted from Lam, 2000.)
The first level describes knowledge from a cognitive perspective. Knowledge is experience-based, contextual depended, and transmitted through social networks. Four types of knowledge are presented based on if it is tacit-explicit or individual-collective.
1. Embrained knowledge (individual-explicit)
• formal, abstract, and theoretical
2. Encoded knowledge (collective-explicit)
• information, signs, and symbols
3. Embodied knowledge (individual-tacit)
• practical and individual
4. Embedded knowledge (collective-tacit)
• organizational routines and shared norms
Organizations possess all types of knowledge, but one is often dominated (Lam, 2000).
The second level describes four types of organizations divided after what kind of knowledge is dominated in the organization, for example, the ability for coordination and learning (Lam, 2000).
1. Professional bureaucracy is dominated by embrained knowledge.
• High level of standardization through the individual's formal education and training
2. Machine bureaucracy is dominated by encoded knowledge.
• Standardization, specialization and control to achieve efficiency and control
3. Operating adhocracy is dominated by embodied knowledge.
• Dominated by collaboration of individual experts (often project based); low standardization and low degree of knowledge accumulation
4. J-form organization is dominated by embedded knowledge.
• Combines stability with flexibility by a strong corporate culture and a knowledge base of the firm
The knowledge and organizations in the third level are related to the education and training system (degree of formalization and academic bias) and to labor markets (degree of mobility for the employee [firm-market]), which results in four types of models (Lam, 2000):
1. Professional (including professional bureaucracy and embrained knowledge)
• narrow learning and inhibits innovation
2. Bureaucratic (including machine bureaucracy and encoded knowledge)
• superficial learning and limited innovation
3. Occupational community (Operating adhocracy and embodied knowledge)
• dynamic learning and radical innovation
4. Organizational community (J-form organization and embedded knowledge)
• cumulative learning and incremental innovation
Lam (2000) described the importance of getting a broader perspective of the organization by involving the environment it performs in to understand how the organization learns and shapes innovation. Another way to understand how organizations learn is by looking at it as an autopoietic system (Koskinen, 2009). Autopoiesis means self-production of the system through the system (Brandhoff, 2009). Luhmann (2006) viewed organizations as social systems held together by a closed network of communication, but the system is not independent of the environment: “a system is the difference between system and environment” (Luhmann, 2006, p. 38). The system continuously responds to the environment, if it is meaningful to the system, by creating a chain of operations with the purpose to adapt to changed demands and learn (Luhmann, 2006). For example, new information to a system is only information if it initiates a change of state in the system. In other words, the information differs from the existing information and creates a difference in the system: reproduction (Luhmann, 2006). Input to the system is not regarded as knowledge but as data. The data is contextualized and interpreted by the individuals, which transforms the data into knowledge. Information is not seen as knowledge; it enables communication and knowledge processes to start (Koskinen, 2009).
Koskinen (2009) applied the thoughts of autopoietic systems when analyzing project-based organizations. The systems capability to regenerate and respond to a dynamic environment is vital for projects. As projects have to be able to manage customers' changed requirements that requires the ability to develop new knowledge and new skills, for example, structural coupling (Koskinen, 2009). Knowledge from an autopoietic epistemology perspective is created and not directly transferrable as it is dependent on history and context. To create knowledge and communicate it both vertical and horizontal (between projects) in project-based companies is vital to avoid system disintegration (Koskinen, 2009).
In this paper, we explore the characteristics of the sourcing and sharing process of information of end users' requirements, when the end users are unknown in two housing firms. The end users are those who will use/occupy the building. The end users have knowledge and opinions about the outcome of the project in relation to their own objectives (Kaya, 2004; Lai & Yik, 2007). The end users, in this study, are unknown during the execution of the construction project; nonetheless, potential end user requirements need to be understood to enable value-creation for them.
The present study involved the investigation of the information and knowledge sharing in two housing firms: one public and one private. The public firm is a property manager, whose responsibilities include maintenance, refurbishment, and new construction. The housing firm is a public real estate concern, wholly owned by the county of the city it is performing in. They supply 20,000 inhabitants with 8,500 dwellings and 100, 000 square-meter habitats (shop premises, office premises, cinema premises, and geriatric care). The business includes building new houses, refurbishment, and operation and maintenance.
The private firm has the main goal of to “build quality homes at prices that allow as many people as possible to buy their own properties.” The company is selling building concepts to licentiate takers in Sweden, Denmark, Norway, Finland, and Great Brittan. The building exists of new-build villas, apartments, and terrace houses. Forty percent of their products are delivered to several public real estate owners as rental houses. The firm develops the concepts, both process and product, and then sells them to a contractor. The contractors build and then sell them to the end users who become the final owners of the property.
The similarities between the companies are:
- The client (the housing firm) is the “main” project manager and the link between the executive project manager and the end users.
- When designing new houses or apartments, the end users are unknown. As a result, the clients have to keep in mind the interests of both the housing firms and the end users.
Both struggle with the difficulty in an effective knowledge “interaction” between projects and the firms.
The focus of this study is on the firms' ability to create knowledge from different sources of information (project specific, surveys, experienced-based, etc.) and consists of a literature study, a workshop, and two case studies. The literature review was performed first, in preparation of the case studies, in order to explore characteristics of the knowledge creation in different kinds of organizations. Next, a workshop was carried out involving clients from the two housing firms studied. During the workshop, a discussion about similarities and differences that have caused struggles was generated.
The case studies involved interviews and studies of documents. The interviews were semi-structured and performed with client representatives from the housing firms. The purpose of the case studies was to determine some of the issues in the management of unknown end users requirements and to gain insight into which are causes for concern. The study is not meant to provide a definitive account of the relations or to present conclusive analysis of how a project should be managed.
No matter how a project is organized, the information about end users' requirements has not only to be gathered but also processed into some kind of value. In this case study of two firms, we found that value creation was consistently considered difficult. For example, during discussions in the workshops, it was said “It is not hard to ask questions; the difficulty is using the information gathered in the value creation process.”
This study was conducted to gain insight into how two firms responded to this difficulty. The findings reveal two very different ways of managing information about unknown end users in the firms studied.
Systems for Collecting Information From/About End Users in the Private Firm
The information flow to determine end user requirements/values within the private firm is illustrated in Figure 2. There, the end users are represented as outside the circle of the client Creating Knowledge of End Users' Requirements: The Interface Between Firm and Project organization, to indicate that the end users are not in contact with the organization at the start of projects.
Figure 2. The Information Flow in the Private Firm Between the Four Parties; Project Department, Marketing Department, Project Executer, and End Users
The study found that though the customers (e.g., end users) of the private firm were not known from the start, the firm put a great deal of effort into trying to understand their future customer and to evaluate the fulfillment of the customers' expectations in occupancy. To do this, the marketing department used a system of surveying and evaluating methods to get the information needed in order to improve and develop the product and project process to meet the needs of the customers. The entire process is illustrated in Figure 3. When the project starts, a survey is conducted by the marketing department to determine how potential customers want to live in that specific market. This survey is followed by parallel work to develop the product and the project performance using a customer perspective. The development of the product begins and ends with different kinds of surveys: the project is initiated with a market survey and followed by a positive-customer-index survey. The surveys include questions about the customers' experience of the external project executers' performance. In addition to these parallel surveys, customer surveys are performed by the marketing department on projects that are two years or older of both product and living area.
Figure 3. The Different Surveys Performed by the Private Firm to Collect Information About Potential and in Use, Existing End Users
The firm works systematically with the different surveys, but the surveys are not linked together into an efficient system. In the words of the marketing manager, “The information is not efficiently fed-forward in the process.”
Systems for Collecting Information From/About End Users in the Public Firm
The information flow of end user requirements/values within the public firm is illustrated in Figure 4. There too, the end users are outside the circle of the client organization, to indicate that the end users are not in contact with the organization at the start of projects.
Figure 4. The Information Flow in the Public Firm Between the Three Parties; Project Department, Marketing Department, and End Users
As with the private firm, the public firm was found to be working with a number of procedures to gain an understanding of the needs of their existing tenants and future ones. The marketing department surveys the existing tenants using satisfaction-customer-indicators and input from meetings with the tenants' associations. Sometimes members from the marketing department are present as well during those meetings. The project department obtains information about the renovation projects (from working groups and questionnaires).
When the company plans to build new housing, the marketing department sometimes performs marketing surveys to obtain information about the interest in the planned housing area. The firm, furthermore, collects information in a data bank about what the tenants wish their future living to be like and where they would like to live. However, the firm does not use the information in a systematic manner. Much of the knowledge the employees rely on is experience based, but this knowledge is not systematically shared. This circumstance can be seen as a risk factor for the firm: when someone quits a job, a lot of knowledge disappears. A more systematic knowledge sharing and building up of information would serve its purposes better.
The cases studied show two project-driven construction firms that want to be competitive by building knowledge. Common characteristics of their information systems were found in their policy regarding two information processes:
- Knowledge gathering: They stated that knowledge gained from the project should contribute to “the body of knowledge” within the firm
- Knowledge sharing: They felt that sharing knowledge from the common body of knowledge within the firm contributes to the improvement of projects.
In both companies, the goal in creating and sharing knowledge of the end users' requirement was to bring value to the end users and to stay competitive on the market. As value is a multidimensional concept with various definitions (Thomas & Mullaly, 2007), the focus of value here is on end user satisfaction and learning about the end users in the organizations.
The study showed that these two knowledge-based processes were not easily managed. It was considered difficult to build up a system for knowledge gathering and sharing that contributed to the body of knowledge and thereby to ensure that value was created to the end users. One reason for this can be that the relevant types of knowledge are of a different kind and hard to combine. Another aspect is whether it is possible to transfer knowledge in a system at all.
Cognitive, Organizational, and Societal Perspective of the Case Studies
We now analyze the organizations according to the framework presented by Lam (2000), and then compare this view to the autopoietic view. According to Lam (2000), a project organization corresponds with the so-called operating adhocracy organization. The environment, in this organizational type, is characterized of a dynamic and complex environment, in which the knowledge is diverse, varied, and organic. The knowledge is mainly of tacit nature and hard to accumulate as it not can be standardized, disembodied, or pre-determined (Lam, 2000).
According to our analysis, the private company appeared to show characteristics that correspond with the type of organization commonly referred to as a machine bureaucratic organization, as it is dominated by standardization, control, and attempts to learn by corrections (performance monitoring). The knowledge obtained through surveys is explicit coded, e.g., information. Tacit knowledge is lost in the translation and aggregation process and, as a consequence, the learning becomes superficial (Lam, 2000). Although the firm attempts to learn by doing (compare with Gann & Salter, 2000) by getting feedback and then improving work from both internal and external sources, the firm has difficulties in creating knowledge of what brings value to the end users. The characteristic of superficial learning in the machine bureaucratic organization could possibly explain why the private firm had problems in creating value of the gathered data from the different surveys. The information of the end users' requirements still just becomes information in the firm: The body of knowledge is only a database of information until the information is related and processed.
The public firm, on the other hand, is decentralized and has the project management function inhouse. The public firm is not standardized to the same extent as the private. It attempts to control the project's performance with surveys and uses market surveys to understand the users' requirements in the initial phase of new builds. The organization can thus be viewed as a weak machine bureaucratic organization (Lam, 2000). A problem arises, however, because much of the knowledge within the firm is carried individually and is of tacit nature, which complicates the learning process. To complete the tasks in the public firm, both formal knowledge and practical skills are required. The public firm faces the same challenge as the private one: to create knowledge of the collected information.
As stated previously, both project-based companies want to gain knowledge from the end users and share it within the firm in order to improve their relations with the end users. The knowledge in the project are of tacit nature and the control of the work and the collection process attempts to make it explicit. In other words, the firms' want to turn tacit knowledge into explicit knowledge, and then they want to transfer it to the firm. This knowledge should build up its body of knowledge and then correct the behaviors, processes, and products in the project and the firm. Is this possible with the existing structures within these companies? Are the project managers applying policy that allows others to become aware of the knowledge they possess or of how they act?
Grant (1996) found that the firm's capability in integrating specialized knowledge is fundamental to their ability to create and sustain competitive advantages. This requires a flexibility in management actions (Grant, 1996). Does the machine bureaucratic organization allow this flexibility or would another form, like the J-form organization, be more efficient? The J-form organization is both stable and flexible, and learning is cumulative and knowledge-based on shared norms and routines. The J-form could be helpful to strengthen the body of knowledge within the firm and deepen it. As the project organization is a dynamic, collaborative, and often experimental in its way of working, what value does superficial knowledge from surveys help the project manager to improve their relation to the end users? A strong culture of shared norms and values in a J-form organization could possibly be more easily transferred to the project. This may be achieved through cooperation between the project management functions and other important functions, i.e., the market division within the firm.
The private firm studied has outsourced the project execution; their ways to impact the project management is probably a more formal kind. Internally, would the firm probably be more efficient from a knowledge-creating perspective of a J-form organization? As the public firm bases their work on more diverse sources of knowledge (surveys, collaboration with end users, and experience-based tacit knowledge), it is probably easier for them to understand the context of their end users and, as a consequence, easier to create value for them than the private firm.
Our findings indicate that one way to enrich the contextual understanding of the end users and thereby more easily understand what they value are focus groups. Focus groups have an unstructured nature that allows uncontrolled information to arise, as a contrast to standardized questionnaire. This often uncovers specific beliefs and values of the target group (Lengua, Roosa, Schupak-Neuberg, Michaels, Berg, & Weschler, 1992), which gets a broader understanding of the contexts of possible future end users. By understanding the context of the end users, it is easier to create value for them and knowledge of their requirements. Thus, not all information needs to be contextualized. It is important to adapt to the specific situation. Information is enough for situations that are more obvious while knowledge of more complex aspects needs to be contextualized. The need to adapt to the situation is in line with Argyris (1999) who said that some learning does not require changes or govern assumptions while others do. Explicit data collected and stored by the firm may be enriched for the project manager by using focus groups (possibly future end users or equals) to make sense of the data for a specific context.
To conclude, knowledge is, from this point of view, regarded as transferrable and has a different nature in the projects and the firms that makes it a challenge to combine them into something valuable. Both companies have difficulties in transforming the collected information into knowledge; the surveys bring information not necessarily knowledge or learning. As a paradox, it has been found that in a time, information is widely used and the need for tacit knowledge in firms has become a crucial factor for the performance of the firm (Lundvall & Nielsen, 2007).
The Autopoietic View
The autopoietic view considers the organization as a self-producing social system held together by communication. One of the difficulties with the collected information seems to be that it is not communicating to the people who are using it in the firms. The process of reproducing does not seem to be triggered, as the firms do not know what to do with or how to act upon the gathered information. Possible reasons could be that the information does not make a difference to the individuals within the system, resulting in that the knowledge creation is not initiated.
To create new knowledge requires learning, creative forgetting, or just forgetting (Lundvall, 1992). This corresponds with the reproduction of the system; flexibility to change its actions after what brings meaning to the system. The knowledge is dependent on history and context, but not stuck in it, which is essential for the organization. If the organization does not possess this capability, the risk increases for disintegration of the system. The concept of reproduction is to a certain degree corresponding with the idea of double-loop learning, as it also requires that the system are willing to change govern values and norms.
From an autopoietic perspective, creating knowledge of the databases in the firms requires that the message of the collected data is understood, which requires human action, so that the data turns into information. The information could then be used as a base for a focus group discussion with possible end users. By getting a contextual understanding of the information, it becomes easier to interpret it and thereby receive an awareness/knowledge of how to create value to the end users. As the environment is dynamic and changes, more data is needed to ensure that the knowledge is current. If a difference exists, this will trigger actions in the system (organization) to adapt to the changes; reproduction. It implies that if the project manager should make use of the data gotten through surveys and other means and stored in databases, it may be necessary to make use of those collecting and putting the data in the database to ensure a full understanding of the data.
Koskinen (2009) concluded that to create knowledge and communicate it both vertically and horizontally (between projects) in project-based companies is vital to avoid that the system disintegrate. A challenge is to know how to communicate it to ensure that knowledge created. Increasing communication is not enough, creating information flows and good communication inside firms is important for learning and innovation (Lundvall, 1992). Is good communication communicating the right things with the right media, and how is that ensured? This study does not answer that question, but it would be of interest for a further study.
Creating knowledge of end users' requirements is an important but challenging task to manage in project driven organizations. Knowledge creation in the interface between the firm and project involves the contribution to the body of knowledge within the firm from the projects and vice versa.
The cases showed that the firm and the projects are different kinds of organizations dominated by different kinds of knowledge. This distinction is important in the knowledge-creating process to (a) better understand what could be expected in the exchange of data and (b) better understand what action needs to be taken in order to create value of it. Certain data needs to be contextualized to bring value while others do not. The study implies that to manage the knowledge creation of end users requirements between firm and project better, the use of standardized questionnaires might be too decoded. The richer the data (tacit and explicit), may create knowledge and in return create value for the end users.
This study further discussed that knowledge creation could probably be improved in the organization by either decreasing the distance between the two organizational forms (machine bureaucracy respectively operating adhocracy) by lightening the dominated knowledge type within them (encoded respectively embodied) or by adapting the embedded knowledge in the J-form organization to create cumulative learning.
The organization's ability to reproduce itself becomes of critical importance to meet the dynamic ever-changing environment. The study highlights the value of analyzing the organization as an autopoietic system to deepen the understanding of knowledge-creating processes. The creation of knowledge should be seen as an ongoing and dynamic process, to be able to meet the changing requirements from the end users.
Future research into the actions and support that the project manager needs is important. It is vital to create the knowledge and the tools needed for the project manager in different situations to ensure that the data is correctly contextualized. A few different main issues are important to address:
- To what extent is internal communication and cooperation utilized and how may it be improved?
- How can external resources, i.e., focus groups or market evaluators, be exploited with best result?
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Sofia Pemsel is a PhD student at the Division of Construction Management, Faculty of Engineering, Lund University. She has a master's degree in civil engineering and is involved in a Nordic Research Project called CREDIT. The aim of CREDIT is to improve transparency on value creation in real estate and construction.
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